Stock Mutual Fund Types

Stock mutual funds are also referred as equity funds and enjoy wide popularity among young investors. There are many types of stock funds, so their classification can be done according to different characteristics.

Classification by strategy type:

1. Growth Funds
   • Considerable degree of risk
   • Target:fastest developing companies
   • Hardly ever provide dividend income
2. Value Funds
   • Target: large and mid-sized companies that are being ignored or not considered "hot" by the other investors
   • Usually provide dividend income
3. Blend Funds - a combination of growth and value funds.

Classification by size:

1. Large-Cap Funds
   • Target: companies with market value more than $9 billion.
   • Well-established and valuable corporations
   • Provide dividend income
2. Mid-Cap Funds
   • Target: mid-sized companies with market value from $1 billion to $9 billion.
3. Small-Cap Funds
   • Target: emerging companies with market value of less than $1 billion.
   • Rarely provide dividend income; instead reinvest profits in their future growth and development.

International Funds

Index Funds

Index Definition: a group of stocks that is representative of a specific market segment. Example: Wilshire 5000, S&P 500, Russell 2000.

The representativeness is accomplished by the acquisition of small amounts of each stock in a market.

Index funds attempt to imitate the behavior of a particular index. They represent a non-intervening way of investing. This means that the fund manager tries to match to the selected index instead of trying to find the best deals or hottest stocks for investment. As a result the operating cost is very low, which in turn creates an advantage over the even most actively managed funds through cost efficiency.

Sector Funds

• Target: particular industry or market segment, such as air transportation, technology, utilities, biotechnology, automotive and other sectors.
• Provide diversification within the selected sector, even though they are less diversified than the other funds.

As you can see from the material provided in this article, stock funds provide a great variety to choose from. You should carefully consider your funds, time and risk tolerance and select the appropriate type of stock fund. If you are a beginning investor, stock funds are a good starting point from where you can further develop yourself as successful entrepreneur.

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